Claiming Motor Vehicle Deductions: A Comprehensive Guide
If you use a car, ute or van for business purposes, you may be able to claim deductions for the related running and operating costs. The ATO recognises three main calculation methods—choose the one that gives you the best result and meets the record-keeping requirements.
Source: ATO: Deductions for motor vehicle expenses
1. Overview of Calculation Methods
Source: ATO: Motor vehicle expense calculation methods
2. Cents-Per-Kilometre Method
Claim a set rate per business kilometre—no need to track actual costs for each trip.
- Rate: 88 cents per kilometre for 2024–25.
- Limit: Up to 5,000 business kilometres per vehicle per year.
- Record-keeping: A log of odometer readings or diary entries showing business kilometres.
- Calculation: Business kilometres × rate.
Source: ATO: Cents-per-kilometre method
3. Logbook Method
Use a representative 12-week logbook to determine the business use percentage, then apply it to all vehicle costs for the year.
- Logbook period: Continuous 12 weeks, valid for five years if business use remains similar.
- Records:
- Start and end odometer readings for each trip.
- Date, purpose, and kilometres traveled.
- Calculation:
- Business kilometres during logbook period ÷ total kilometres during period = business-use %
- Business-use % × total vehicle expenses = deductible amount
- Expenses included: Fuel, oil, servicing, repairs, insurance, registration, depreciation, lease payments, and parking fees.
Source: ATO: Logbook method
4. Actual-Cost Method
Calculate the exact work-related portion of all running costs by apportioning each expense.
- Included costs:
- Fuel, oil and servicing
- Repairs and maintenance
- Insurance and registration
- Depreciation (or lease payments)
- Interest on finance (for a financed vehicle)
- Parking fees
- Calculation:
- Total cost for each category for the year
- Work-related % (e.g. using logbook or reasonable estimate)
- Multiply total cost by work-related % for each category
- Sum of apportioned costs = deductible amount
- Record-keeping: Detailed receipts, logbook or diary to support percentage allocations.
Source: ATO: Actual-cost method
5. Motor Vehicle Expenses for a Home-Based Business
If you operate your business from home and use your vehicle for business-to-home travel, additional claims may apply.
- Travel between home and your main place of business:
- Generally not deductible unless you carry bulky tools or equipment needed for work.
- Can claim if you carry equipment that cannot be left at home or at the workplace.
- Towing a trailer: Claim using usual calculation method if trailer is essential for business.
- Transporting portable tools or equipment: Claim a deduction for business trips that involve carrying tools or stock.
Source: ATO: Motor vehicle expenses for a home-based business
6. Choosing the Right Method
To decide which method is most beneficial:
- Estimate your deduction under the cents-per-kilometre method (88c × estimated business km).
- Estimate your deduction under the logbook method using a 12-week sample.
- Estimate your deduction under the actual-cost method by totaling and apportioning expenses.
- Compare the three amounts and choose the highest, ensuring you can meet the record-keeping requirements for that method.
7. Record-Keeping Requirements
- Keep odometer records or logbook entries for each trip.
- Retain all receipts, invoices and finance statements for at least five years.
- Document how you calculated any percentage allocations for work-related use.